The number of Americans signing contracts to buy previously owned homes unexpectedly rose in December, signaling that foreclosure-driven declines in prices are boosting demand.

The index of pending home resales climbed 6.3 percent to 87.7, the first increase since August, from a revised 82.5 in November, the National Association of Realtors said in a report today in Washington. Other reports showed a record number of houses for sale stood vacant last quarter and property values sank by more than $3 trillion last year.

Builder shares jumped on the increase in contracts and on reports the Obama administration, in seeking to stem record foreclosures, is considering offering government guarantees to mortgage lenders that modify loan terms. Still, restrictive lending rules and further price declines mean most buyers will keep away from the market, extending the real-estate recession.

“With prices and mortgage rates down, all that we are missing is the money,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “Once mortgage funds start flowing again, we could see a nice pick up” in sales and stabilization in prices, he said.

Stocks rose following the reports, reversing earlier losses, while Treasury securities dropped. The Standard & Poor’s 500 Stock Index climbed 1.6 percent to close at 838.51. The builder supercomposite index jumped 8.6 percent. The yield on the 10-year note was 2.87 percent at 4:25 p.m. in New York, up from 2.72 percent at the close yesterday.

(Source: Bloomberg.com)